GOP's bold gamble on deficit talks

POLITICO

Published 5:36 pm, Thursday, June 23, 2011

Faced with an Aug. 2 deadline and no deal in sight, Republicans opted Thursday to blow up deficit-reduction talks with the White House, a bold gamble to change the dynamic but one that also betrays the party's anxiety over pressures to give ground on defense cuts and tax expenditures.

The GOP's immediate goal is to draw President Barack Obama more directly into the fray, but this also shifts the burden back onto Speaker John Boehner (R-Ohio) and greatly increases the odds that the debt ceiling fight will spill into the August recess before it is resolved.

Just a week ago, Vice President Joe Biden - who has been leading the talks - described the negotiations as a chance for both political parties to show world markets that "we can handle difficult decisions." But having picked this risky fight over increasing the debt limit, Republican leaders are genuinely uncertain - even frightened - that they don't know where their votes will come from to avoid the threat of default, and two dynamics are now in play.

The first, seen Thursday, is to pull in Obama to force the president to pay a price in 2012 and counter what the GOP sees as Democrats' retrenchment against spending cuts and Medicare reforms to slow the rising debt. Second is the notion that he who compromises early loses, and with a restless caucus like the House GOP conference, it is better to wait until the final moments - just as in the government shutdown scenario this past spring.

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"They have to be embarrassed into doing what's right," said a Democratic observer. "And that's an important dynamic of what is being set up here."

Ironically, Obama had met quietly with Boehner Wednesday night at the White House, where their discussions included the debt issue. But Thursday morning, it would be Boehner's second in command and sometime rival, House Majority Leader Eric Cantor (R-Va.), who fired the first shot, pulling out of the negotiations immediately because of differences over taxes.

Biden, in a statement released by the White House on Thursday evening, signaled he was ready to continue but that much depends on the leaders in Congress. And Majority Leader Harry Reid (D-Nev.) said, "I think it's now in the hands of the speaker and the president and, sadly, probably me."

"The goal of these talks was to report our findings back to our respective leaders," Biden said. "The next phase is in the hands of those leaders, who need to determine the scope of an agreement that can tackle the problem and attract bipartisan support. For now, the talks are in abeyance as we await that guidance. We stand ready to meet again as necessary."

"As the president and I have made clear from the beginning, the only way to make sure we begin to live within our means is by coming together behind a balanced approach that finds real savings across the budget - including domestic spending, defense spending, mandatory spending and loopholes in the tax code. We all need to make sacrifices, and that includes the most fortunate among us."

Others said the work done by the Biden negotiators since May should not be thrown out so easily, and Boehner's reaction to Cantor's decision showed no eagerness to jump in.

"I understand his frustration. I understand why he did what he did," the speaker said, "but I think those talks could continue if they're willing to take the tax hikes off the table."

Kyl, who later talked with Biden by phone, has signaled a greater willingness to continue. His statement with McConnell stopped short of a complete break, and when asked why it wasn't clearer, he said, "Because things aren't clear about the future."

When asked if Cantor's move has surprised him, Kyl grinned, "I'm not going to answer a question like that."

Indeed, Cantor had sent mixed signals earlier this week, first saying that he wanted greater involvement by the president and then confirming that he remained committed to the talks led by Biden. Within GOP leadership circles, there had been concern that perhaps he was overly committed to the process, and once he saw the speaker visiting the White House Wednesday night, this could have made him more wary of proceeding.

Taxes are the most sensitive issue for the GOP, and Cantor chose to make his break by inviting in The Wall Street Journal, whose editorial pages are famous for their anti-tax orthodoxy. But the decision also came as Cantor found himself on the defensive in the talks Wednesday over Democratic demands for greater cuts to military spending.

Explaining his decision, Cantor said in a statement issued after the Journal interview:

"Each side came into these talks with certain orders, and as it stands, the Democrats continue to insist that any deal must include tax increases. There is not support in the House for a tax increase, and I don't believe now is the time to raise taxes in light of our current economic situation. Regardless of the progress that has been made, the tax issue must be resolved before discussions can continue."

Indeed, the Biden meetings have made some progress toward crafting a budget bill that would be a down payment toward what's been described as a larger $4 trillion deficit reduction plan over the next 10 years - the same goal set last December by a presidential debt commission.

But it had never been realistic that the Biden talks could complete the deal without turning it over to Obama and the speaker. And for Cantor to pull out frustrated Biden, who has scheduled almost daily meetings stretching into Friday in hopes of showing something tangible before the House goes home for its July 4 recess next week.

Talks this week have covered a range of topics, including new savings from the Pell Grant program for low-income college students, and the negotiators have discussed packages that would save close to $1 trillion from discretionary spending over 10 years.

But within this context, Democrats and the administration have betrayed a growing frustration with Cantor and Republicans for refusing to show more give on defense spending. Among the dozen annual House appropriations bills for the 2012 fiscal year that begins Oct. 1, the Pentagon budget stands out because it goes up - by as much as $17 billion.

Kyl is a strong advocate of defense spending, but in the case of the House, the dispute also betrays the fact that leaders such as Cantor are reluctant to go against a bloc of more hawkish Armed Services Republicans whose votes will be needed for the final deal to pass.

To this degree, it is a replay of the tensions seen in April when Obama and Boehner had to negotiate a budget deal for 2011. Now that Republicans have picked an even higher-stakes fight over the debt ceiling, Democrats argue that Cantor and other leaders must also be willing to "lead" their party toward a compromise by accepting more concessions.

Taxes represent a still tougher hurdle, and Republicans are increasingly fearful of being pushed back against an August deadline - and then pressured to make concessions on revenues.

A recent Senate vote striking down ethanol tax subsides fed such speculation, and since then, McConnell has been especially agitated.

"There's one of two things going on here: Either someone on the other side has forgotten that there's strong, bipartisan opposition in Congress to raising taxes," the Republican leader said in his attack on Obama on Thursday. "Or someone involved is acting in bad faith."

McConnell's own role could increase as well. He managed to sit out most of the talks in March and April over the 2011 budget, deferring to Boehner. But the Senate has a bigger part in the debt fight, and given the stakes for all Republicans, it may demand McConnell's skills.